These days he is buying relatively healthy banks in Florida and other troubled markets. While his favorites have problems with nonperforming loans, they have enough capital to survive and grow by acquiring weakened competitors. Florida holdings include 1st United Bancorp ( FUBC) and CenterState Banks ( CSFL). "After they complete a few acquisitions, they will show amazing earnings growth," says Schutz. Ellison's FBR Small Cap Financial returned 14% annually during the past decade. He holds a mix of strong banks and weaker institutions. He figures that both kinds of stocks have good upside potential. The healthier companies seem poised to gain market share, while the troubled businesses can rebound from depressed levels. A weaker holding is Huntington Bancshares ( HBAN). The bank has been losing money, but its nonperforming loans are declining. The stock sells for less than book value. "They are getting their arms around the nonperformers, and they have ample reserves to survive," says Ellison. A healthy holding is Hudson City Bancorp ( HCBK). By reining in costs and focusing on plain-vanilla mortgage lending, the bank reported record profits last year. The shares sell for 1.2 times book value. Holding a broad collection of banks and thrifts, John Hancock Regional Bank Fund has returned 5.6% annually during the past decade, outdoing 55% of competitors. Welch, the manager, owns a mixed group of strong and weak companies. A profitable holding is JPMorgan Chase ( JPM), which sells for book value and earned $2.26 per share in the past year. With conditions improving, Welch figures the company can increase annual earnings to $4 a share by the end of next year. If the shares trade at a modest 10 times earnings, the stock would rise 50% from $40 today. A shakier holding is Zions Bancorp ( ZION). The bank has been losing money, but Welch says the stock is cheap, trading for less than book value.